The Sol situation: a spotlight on Spain’s housing crisis

I run the risk of being labeled as a hypocrite writing about the housing crisis of Spain, for we are that one non-Spanish family leasing a property in the center of Madrid. It will probably aggravate it further to say that we did not displace a local but just another foreigner — the rental rate, to tell the harsh truth is not affordable vis-a-vis the local wages.

The foreign perspective is hollow, limited and myopic but it can understand anger against greed. It can draw life examples when men in suits come and say “but it isn’t greed, it’s just good business sense” by counter-asking, “is the law of supply and demand really the sole factor, or dominant if you will, that is applied in a social democracy?” It can commiserate with the most hardworking who according to life’s rulebook does not necessarily have to be the most well-paid. Life isn’t fair and when the “in accordance with the law” does not favor the poor but the cunning, it’s a gut-punch to anyone who takes a world-view, not a self-view.

The image of an 87 year old, disabled Maria del Carmen Abascal, nicknamed Maricarmen, being evicted out of the home she lived in since 1956 sent shockwaves around Spain. The investment firm, Urbagestion that bought out her flat sought a rental price increase from 500€ to 2650€. Unable to cover the new cost, the real estate company filed a lawsuit against Maricarmen seeking termination of the lease.

The lease itself is a contentious subject — the original contract belonged to her father. It was an old, rent-protected tenancy agreement (renta antigua) dating back to the Franco era when rental prices were very tightly controlled and heavily capped. This tenancy agreement, under the 1964 law can be passed on to certain family members through a process called subrogation up to two times. When the father died, the contract passed on to her mother. In 2005, Maricarmen was subrogated into it and she took over the lease. That point is critical —  she continued paying the rent, although the price, safe to say, does not reflect the current market price of a 90 square meter property in the Retiro neighborhood.

When the 1994 Urban Tenancy Act came into force, it placed limits on old-rent contracts. Those who inherited renta antigua via subrogation can only keep the original agreement for a limited time (up to two years), unless they have a disability of 65% or more. Maricarmen has a recognized disability of 50%. The Provincial Court ruled that Maricarmen’s contract is invalid, and the Supreme Court rejected the appeal on her behalf, making the ruling final.

Hours leading to the eviction, reports surfaced that anonymous donor(s) offered to pay the rent, but the real estate company rejected the proposal.

After three failed attempts and multiple court hearings, the eviction was finally enforced on 23 September. The embattled elderly reportedly suffered extreme stress, and compounded by her reduced mobility she had to be wheeled out on a stretcher and be sent to the hospital.

Tens of thousands of people mobilized a mass protest in Madrid, and since 26 September has set up camps in Puerta del Sol and settled in the square, rain or shine. Other major public demonstrations, with attendance exceeding 10,000 are reported in Valencia, Barcelona, Malaga, Granada, Zaragoza, A Coruña, and Cadiz. The public outcry is unshakable — vulture funds must be regulated and greater protection to tenants, especially vulnerable ones must be safeguarded.

Prime Minister Pedro Sanchez called for a snap election after the proposals on housing reform were rejected by the Parliament. The election will take place on 29 November.

On the eve of her scheduled return to her home, following renewed negotiations and Urbagestion relenting to restore her old rent to 500€ for the next eight years, Maricarmen died 7 October in the hospital.

Rent Expense: An Illustration

To understand what the activists in the Sol encampment are fighting for, let’s examine the issue under prevailing market conditions and crunch up some numbers.

The Instituto Nacional de Estadística (National Statistics Institute) is the official government agency responsible for tracking economic indicators like inflation and employment rate. According to its latest publication, the median wage sits at 2,001.4€. Factoring in the standard deductions such as Social Security and income tax, we arrive at a monthly net income of 1,615€. The same webpage indicates that the average (median is not available unfortunately) monthly income in Madrid is 2,761.7€, which translates to a take home pay of 2,127€.  Interestingly, Madrid has the lowest income tax within Spain.

Idealista publishes the rental rate per square meter within Madrid. For apples to apples comparison, we will use the 2024 data, priced at 20.9€ per sqm. It must be mentioned that this data encompasses all of Madrid, the prestigious neighborhoods are priced much much higher. In 2024, a sensible budget of 630€, excluding utilities, is needed to live decently.

If you follow the rule of thumb to cap your budget on rent to 30%, then you only have 485€ maximum allowance for rent with the national median wage, and 638€ if we use the average pay in Madrid as reference. Even if we use the average pay, which basic economics teaches us as not the best indicator of purchasing power, you barely make ends meet. Anyone with a healthy sense of ambition and a life plan is within good reason to feel nervous about soaring rent prices. Or upset.

A 30sqm living space is modest and comfortable — nothing grand, nothing excessive. Nowadays, a quick search in Idealista, with results sorted by lowest price and usable spaces under 30sqm, quotes 680€. Securing the lease means paying the usual arrangement of 1 month deposit (fianza) and 1 month’s rent paid in advance. Landlords can legally request up to 2 additional months of rent as extra security, referred to as additional guarantee (garantia adicional) on top of the fianza and the 1 month advance payment.

More distressingly, Banco de España published in its latest annual report a shortage of 750,000 homes in Spain. Its findings (page 14) feels like a clarion call:

— These affordability problems have been aggravated by the fact that house prices have risen faster than household income, increasing the cost burden of buying a home and tightening the conditions for doing so in Spain to a greater extent than in the major European economies.

— The housing cost burden, whether to purchase or rent, is particularly high in large cities and among young people and new residents, and shows marked regional dispersion.

— Housing affordability problems are concentrated most in the rental market, especially in new contracts, where rents have risen sharply.

“Nothing personal, just business”

Two weeks ago, I met my friends visiting from Valencia. One of them is an interior decorator, he oversees completed housing projects and curates bare indoor spaces with furniture, lighting and all other accessories needed to achieve the aesthetic mandate. With a heavy sigh, he shared that none of the clients who had come for an ocular inspection was Spanish. The prospects are all foreigners.

“It hurts to see it,” he told me.

That remark is neither fascist nor racist; it’s evidence of imbalance. The nice apartments with cozy furnishings and livable spaces with sea views are marked reserved, waiting for Bank of America’s wire transfer to clear.

He is a practical man, he understands how the world works but the moral burden plagues him nevertheless. He ordered another bottle of Ribera right after, and I felt the shift in his mood. I understand him too, I know that it’s not altruism that pays for my acai bowls.

But can one really detach from such distorted reality? Can you really not take it personally?

We can start with what the United Nations has to say about it:

““The global housing crisis cannot be addressed without tackling land inequality, speculation, and the need to recognise the social and human dimensions of land,” said Balakrishnan Rajagopal…Land is not just property to be bought or sold,” the expert said. “It is where people build roots, express their culture, establish communities and a sense of belonging..."

It adds, "In a world of rampant wealth inequalities, the report calls for a fundamental shift from viewing land as a commodity towards affirming its social function"

It is indeed disconcerting when homes are overtaken in a terrifyingly rapid scale, not by individual owners, but by investment firms. To use homes as speculative investments, and I don’t mean one or two homes, but a large buyout of entire residential buildings and then charge a heavy premium isn’t simply maximizing rewards or understanding the market, it trespasses on exploitation. A sweep up of the local supply and afterwards offering a mark-up that's not aligned with the local realities is oppression.

I want to end this write-up on what the modern society would probably consider the most outdated source — philosophy. Instead of public discourse, it found its place in memes. I don’t know which of the two will ultimately prove to unlock the questions of the universe: mathematics or philosophy. Most would say mathematics of course, and that is empirically true. But I hope there’s few people out there who would pause and say, “It actually depends on the question.”

Aristotle posits the teleological ethos — an object is best understood by its purpose. I encountered the concept of telos thanks to the free online course by Harvard University and the professor, Michael Sandel, presented it this way:

The question: Suppose we are distributing flutes. Who should get them?

The answer: The flutes should be given to the flute players. Because that’s what flutes are for.

According to Aristotle, it is unjust to decide by any other measure, such as wealth (giving the flutes to the ones who can pay the highest price,) or nobility of birth (giving them to aristocrats,) or chance (having a lottery awarding flutes)

What then is the telos of a house? And who is best suited to fulfill its purpose? Is it a real estate company profiling by earning capacity, or is it two generations of a family that have created seven decades worth of memories? Does a house exist to generate revenues from cleaning fees, or does it exist as venue for character formation so that a mother can teach her sons and daughters to clean their own rooms? Is a house the

print-out pasted on the windows of agencies with a big font of “se alquiler” or is a house the storyteller and secret-keeper of joy, love, suffering and anguish its walls have heard and preserved?